China now the top holder of U.S. debt

Posted By Jerome Chen Tuesday, November 18, 2008 - 3:41 PM Share

Good news for those of you who answered "China" on question 7 of the current FP Quiz: Your instincts are now correct. At the time of publication, U.S. Treasury data still showed that Japan held the most U.S. treasuries of any country. But new figures reveal that China has now taken the top spot. China increased its holdings to $585 billion in September, compared with $541.4 billion in August. Meanwhile, Japan shaved its holdings from a high of $600.7 billion in March of this year down to $571.4 billion in September.

The October figures will be even more interesting, though. Aside from the $585 billion, China was holding some $400 billion in Fannie Mae and Freddie Mac debt. With the acquisition of the two mortgage lenders by Hank Paulson, American Taxpayers, et al., China announced it would decrease its dollar holdings to diversify its foreign reserve portfolio. How much did China help fund the $700 billion TARP program? We'll know soon.

China Photos/Getty Images

EXPLORE:EAST ASIA, CHINA, ECONOMICS
 

BSETSER

11:14 PM ET

November 18, 2008

Two points: a) $585 billion

Two points:

a) $585 billion actually understaes China's true holdings of treasuries. the last two "survey's" (the last one was in june 07) have revised China's holdings of treasuries up substantially (look at the historical data on treasury holdings). the next survey (out next year) will do the same .. realistically, given the buildup of treasuries in london, which already has (my view) close to $700 billion treasuries.

b) the $585 billion total does NOT include Agencies. China has at least another $450b in agencies, and more like $550-600b in my view.

remember china has $1.9 trillion in reserves plus $200b in bank fx reserves managed by the pboc and $200b at the cic/ state banks -- so $585b wuld actually be a small fraction of china's total reserves/ f. assets

bsetser

 

JEROME CHEN

10:45 AM ET

November 19, 2008

Thanks bsetser

Corrected.

 

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